How Does a Credit Card Work?

A credit card is issued by a bank to a creditor based on the credit worthiness of that creditor. Learn about the available line of credit in a credit card with help from a registered financial consultant in this free video on credit and personal finance.

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Video Transcript

This is financial adviser Patrick Munro talking about how does a credit card work? A credit card is issued by a bank to a creditor based on the credit worthiness of that creditor. Once they receive their credit card in the mail it has an available line of credit. It is up to that consumer to use the credit card in a mindful way to keep the credit card balances low and pay off the balances when they come due or if you have to carry a balance to make sure that you pay more then the minimum monthly payment. A credit card then is presented to vendors of goods and services by the consumer and the merchant will swipe that credit card from the terminal and money from the bank will be given to the vendor for the payment of those goods and services chosen by the consumer. What happens then is the consumer takes ownership of the goods and services but then incurs a debt from the bank going forward so make sure to keep your debt levels down and enjoy the conveniences of credit cards. This is Patrick Munro talking about how a credit card works.